Exhibit 10.49
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AND CONSENT AND WAIVER
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THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AND CONSENT AND WAIVER (the
"Amendment") is made as of this 27th day of November, 2002, by and between/among
"Borrower" (as defined below) and "Lender" (as defined below).
RECITALS
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A. As used herein, the term "Borrower" shall mean the following
collectively: New York Health Care, Inc., a New York corporation ("New York
Health Care"); and NYHC Newco Paxxon, Inc., a New York corporation.
B. As used herein, the term "Lender" shall mean Xxxxxx Healthcare Finance,
Inc., a Delaware corporation.
C. One or more of the entities designated above as "Borrower" are the
existing borrowers under a certain Loan and Security Agreement dated as of
November 28, 2000, by and between such existing borrowers and Lender (as the
same may have been amended, restated or modified from time to time, and as the
same may be amended by this Amendment, the "Loan Agreement"). All capitalized
terms not otherwise defined herein shall have the meanings given them in the
Loan Agreement.
D. Borrower and Lender desire hereby to:
- extend the Term of the Loan Agreement to November 29, 2004, and
make conforming amendments to the Loan Agreement; and
- amend the Loan Agreement as hereinafter provided.
E. In addition, Borrower has informed Lender that New York Health Care has
entered into a Stock for Stock Exchange Agreement dated October 11, 2001 (as
amended on February 13, 2002, July 10, 2002, August 13, 2002 and October 25,
2002, the "Exchange Agreement") with The Bio Balance Corp. ("Bio Balance"),
pursuant to which, among other things, a wholly owned subsidiary of New York
Health Care will merge with and into Bio Balance (such merger, the "Proposed
Transaction"). It is anticipated that, following consummation of the Proposed
Transaction, which is expected to occur on or around January 2, 2003 and which
remains subject to, among other things, the approval of the shareholders of New
York Health Care and the consent of various federal and/or state agencies, (a)
Bio Balance will become and operate as a wholly owned subsidiary of New York
Health Care (in such capacity as a wholly owned subsidiary of New York Health
Care after consummation of the Proposed Transaction, "Bio Balance Sub") with its
own officers, directors and financing sources, and (b) the shareholders of Bio
Balance will own approximately ninety percent (90%) of the then issued and
outstanding shares of common stock of New York Health Care.
F. Section 7.4(d) of the Loan Agreement prohibits Borrower from acquiring,
by purchase or otherwise, all or any substantial part of the business or assets
of, or stock or other evidence of beneficial ownership of, any Person. In
connection with the Proposed Transaction, Borrower has requested that Lender (a)
agree to permit New York Health Care to consummate the Proposed Transaction, and
(b) waive the prohibition set forth in Section 7.4(d), and any other applicable
prohibitions in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower have agreed to the following amendments to the Loan
Agreement:
1. Recitals. The foregoing recitals, including all terms defined therein,
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are incorporated herein and made a part hereof.
2. Extension of Term. The Term of the Loan is extended to November 29,
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2004, and the Loan shall mature as of November 29, 2004. In furtherance of the
foregoing, Section 2.8(a) of the Loan Agreement is hereby amended and restated
to read as follows:
"2.8(a) Subject to Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default, this Agreement
shall be in effect for a period through and including November 29,
2004, unless terminated as provided in this Section 2.8 (the 'Term')."
3. Base Rate. Section 1.5 of the Loan Agreement is hereby deleted in its
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entirety, and in its place there is hereby inserted the following:
"SECTION 1.5. BASE RATE. "Base Rate" means a rate of interest equal to
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one and one half percent (1.5%) above the "Prime Rate of Interest"."
4. Prime Rate of Interest. Section 1.42 of the Loan Agreement is hereby
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deleted in its entirety, and in its place there is hereby inserted the
following:
"SECTION 1.42. PRIME RATE OF INTEREST. "Prime Rate of Interest" means
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that rate of interest designated as such by Citibank, N.A., or any
successor thereto, as the same may from time to time fluctuate."
5. Termination Fee. Section 1.48 of the Loan Agreement is hereby deleted in
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its entirety, and in its place there is hereby inserted the following:
"SECTION 1.48. INTENTIONALLY LEFT BLANK"
6. The Concentration Account. The penultimate sentence of Section 2.3 of
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the Loan Agreement is hereby deleted in its entirety, and in its place there is
hereby inserted the following:
"All funds transferred from the Concentration Account for application
to Borrower's indebtedness to Lender shall be applied to reduce the
Loan balance, but for purposes of calculating interest shall be
subject to a three (3) calendar day clearance period."
7. Loan Agreement Fees.
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(a) Section 2.4(c) of the Loan Agreement is hereby deleted in its entirety,
and in its place there is hereby inserted the following:
"2.4(c). For so long as the Loan is available to Borrower from and
after November 28, 2002, Borrower unconditionally shall pay to Lender
an annual usage fee (the "Usage Fee") equal to (i) one half of one
percent (0.5%) of the average amount by which the Maximum Loan Amount
exceeds the average amount of the outstanding principal balance of the
Revolving Credit Loans during the preceding year (or portion thereof,
if this Agreement is terminated prior to the completion of a full year
for purposes of such calculation) minus (ii) the amount of interest
paid by the Borrower with respect to outstanding Revolving Credit
Loans during the preceding year (or portion thereof, if this Agreement
is terminated prior to the completion of a full year for purposes of
such calculation); provided that if the amount described in the
foregoing clause (ii) exceeds the amount described in the foregoing
clause (i), the Usage Fee shall be equal to zero dollars ($0). The
Usage Fee shall be payable annually in arrears on November 28, 2003
and November 29, 2004 or, if this Agreement is terminated prior to
either such date, the effective date of such termination."
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(b) In addition, the first sentence of Section 2.4(d) of the Loan Agreement
is hereby deleted in its entirety, and in its place there is hereby inserted the
following:
"2.4(d). Provided that no Event of Default exists under this Agreement
or any of the other Loan Documents, Borrower shall be required to pay
to Lender all audit and appraisal fees (up to a maximum of $10,000.00
per year) and all out-of-pocket expenses in connection with audits and
appraisals of Borrower's books and records and such other matters as
Lender shall deem appropriate; provided, however, that upon the
occurrence and during the continuance of any Event of Default under
this Agreement or any of the other Loan Documents, the foregoing cap
shall not apply, and (i) Borrower shall be obligated to pay for any
and all fees described in this Section 2.8(d) that are incurred during
such period, and (ii) the aggregate amount of the fees incurred
pursuant to (i) above shall not be applied towards the amount of such
annual cap."
8. Consent and Waiver. Lender hereby (a) agrees to permit New York Health
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Care to consummate the Proposed Transaction, and (b) waives the prohibition set
forth in Section 7.4(d) of the Loan Agreement and any other express provisions
of the Loan Agreement that would, by their terms but for the conditions set
forth herein, prohibit Borrower from consummating the Proposed Transaction, in
each case on the terms and subject to the conditions set forth below:
i. New York Health Care and Bio Balance will comply fully with all
of the terms and conditions set forth in the Exchange Agreement;
ii. As of the closing of the Proposed Transaction (and after giving
effect thereto), no single shareholder or affiliated group of Bio
Balance shareholders will own ten percent (10%) or more of the
then issued and outstanding shares of New York Health Care (after
giving effect to the consummation of the Proposed Transaction);
iii. Following consummation of the Proposed Transaction:
A. Bio Balance Sub will not (i) become a Borrower under the Loan
Agreement, (ii) be the beneficiary or otherwise directly or
indirectly receive the proceeds of any Loans made by Lender under
the Loan Agreement, or (iii) commingle its operating or working
capital or any of its other monies or funds with the operating or
working capital or other monies or funds of either entity
comprising Borrower;
B. Bio Balance Sub will (i) maintain its own depository and other
bank accounts in its own name separate from those depository and
other bank accounts maintained by and in the name of any entity
comprising Borrower, and (ii) fund its own working capital needs
(including any research and development expenses, regulatory
filings and other similar costs related to the development and
approval of its probiotic treatments) through its own operations
and/or the proceeds of any debt or equity offerings and/or other
asset sales or other similar transactions by Bio Balance Sub;
C. Neither New York Health Care nor any other Borrower will (i)
distribute or transfer to or otherwise provide Bio Balance with
the benefit of any proceeds of any Loans made by Lender pursuant
to the Loan Agreement, (ii) commingle its operating or working
capital or any of its other monies or funds with the operating or
working capital or other monies or funds of Bio Balance Sub,
(iii) maintain any depository or other bank account in its name
and also in the name of Bio Balance Sub, or (iv) make any cash or
non-cash distributions to, or any investments in or loans
(including any non-cash intercompany transaction) to, Bio Balance
Sub, notwithstanding that the Loan Agreement may otherwise permit
a Borrower entity to engage in any such transactions with its
subsidiaries;
D. New York Health Care shall provide Lender with copies of the
employment agreements of Xxxxx Xxxxx and Xxxxx Xxxxxxxxx, which
shall provide that such individuals will continue, subject to the
terms of such agreement, to serve in their current respective
capacities for New York Health Care for a period ending on or
after the seventh anniversary of the Proposed Transaction; and
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E. New York Health Care will continue to provide Lender with the
financial and/or collateral reports described in Section 6.1 of
the Loan Agreement as and when required thereunder with respect
to the financial operations, assets and/or business of each
Borrower and also Bio Balance Sub as if Bio Balance Sub were a
Borrower under the Loan Agreement;
iv. No Change of Control shall have occurred as the result of the
consummation of the Proposed Transaction.
9. Amendment Fees. In consideration of Lender's execution of this
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Amendment, Borrower agrees to pay a fee of $10,000, which fee shall be deemed
earned and payable on the date of execution of this Amendment and shall
constitute a portion of the Obligations.
10. Additional Covenant. Without limiting the generality of any covenant in
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the Loan Agreement, Borrower and Lender hereby further covenant and agree as
follows:
HIPAA Compliance. As used herein, "HIPAA" means the Health Insurance
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Portability and Accountability Act of 1996, as the same may be amended, modified
or supplemented from time to time, and any successor statute thereto, and any
and all rules or regulations promulgated from time to time thereunder. To the
extent that and for so long as Borrower is a "covered entity" within the meaning
of HIPAA, Borrower (i) has undertaken or will promptly undertake all necessary
surveys, audits, inventories, reviews, analyses and/or assessments (including
any necessary risk assessments) of all areas of its business and operations
required by HIPAA and/or that could be adversely affected by the failure of
Borrower to be HIPAA Compliant (as defined below); (ii) has developed or will
promptly develop a detailed plan and time line for becoming HIPAA Compliant (a
"HIPAA Compliance Plan"); and (iii) has implemented or will implement those
provisions of such HIPAA Compliance Plan in all material respects necessary to
ensure that Borrower is or becomes HIPAA Compliant. For purposes hereof,
"HIPAA Compliant" shall mean that Borrower (x) is or will be in compliance with
each of the applicable requirements of the so-called "Administrative
Simplification" provisions of HIPAA on and as of each date that any part
thereof, or any final rule or regulation thereunder, becomes effective in
accordance with its or their terms, as the case may be (each such date, a "HIPAA
Compliance Date") and (y) is not and could not reasonably be expected to become,
as of any date following any such HIPAA Compliance Date, the subject of any
civil or criminal penalty, process, claim, action or proceeding, or any
administrative or other regulatory review, survey, process or proceeding (other
than routine surveys or reviews conducted by any government health plan or other
accreditation entity) that could result in any of the foregoing or that could
reasonably be expected to adversely affect Borrower's business, operations,
assets, properties or condition (financial or otherwise), in connection with any
actual or potential violation by Borrower of the then effective provisions of
HIPAA.
11. Miscellaneous.
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(a) Joint and Several Liability. Each entity constituting Borrower
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shall be jointly and severally liable for all of the obligations of Borrower
under the Note and the Loan Agreement. Each Borrower, individually, expressly
understands, agrees and acknowledges, that the Loan would not be made available
on the terms in the Loan Agreement in the absence of the collective credit of
all of the Borrowers, the joint and several liability of all Borrowers, and the
cross collateralization of the collateral of all Borrowers. Accordingly, each
Borrower, individually acknowledges that the benefit to each of the participants
in the facility as a whole constitutes reasonably equivalent value, regardless
of the amount of the Loan actually borrowed by, advanced to, or the amount of
collateral provided by, any individual Borrower. In addition, each entity
comprising Borrower hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in the Loan Agreement shall be applicable to and shall be
binding upon and measured and enforceable against each individual entity
comprising Borrower, and shall be binding upon and measured and enforceable
against all such entities when taken together.
(b) References. Upon the effectiveness of this Amendment, each
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reference in the Loan Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of similar import shall mean and be a reference to the Loan
Agreement as amended by this Amendment.
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(c) Affirmation. Except as specifically amended above, the Loan
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Agreement, and all other Loan Documents (and all covenants, terms, conditions
and agreements therein), shall remain in full force and effect, and are hereby
ratified and confirmed in all respects by Borrower. Borrower covenants and
agrees to comply with all of the terms, covenants and conditions of the Loan
Agreement, as amended hereby, notwithstanding any prior course of conduct,
waivers, releases or other actions or inactions on Lender's part which might
otherwise constitute or be construed as a waiver of or amendment to such terms,
covenants and conditions.
(d) No Waiver. The execution, delivery and effectiveness of this
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Amendment shall not, except as expressly provided in this Amendment, operate as
a waiver of any right, power or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement, the Loan Documents or any other documents,
instruments and agreements executed or delivered in connection with any of the
foregoing. Nothing herein is intended or shall be construed as a waiver of any
existing defaults or Events of Default under the Loan Agreement or other Loan
Documents or any of Lender's rights and remedies in respect of such defaults or
Events of Default.
(e) No Novation. This Amendment (together with any other document
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executed in connection herewith) is not intended to be, nor shall it be
construed as, a novation of the Loan Agreement.
(f) Governing Law. This Amendment shall be governed by and construed
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in accordance with the laws of the State of Maryland, without regard to any
otherwise applicable conflicts of law principles.
(g) Headings. Section headings in this Amendment are included for
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convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(h) Counterparts. This Amendment may be executed in counterparts, and
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both counterparts taken together shall be deemed to constitute one and the same
instrument.
(i) Time of the Essence. Time is of the essence of each and every
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covenant and agreement herein made by Borrower.
(j) Release. Borrower hereby fully, finally, and absolutely and
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forever releases and discharges Lender and its present and former directors,
shareholders, officers, employees, agents, representatives, successors and
assigns, and their separate and respective heirs, personal representatives,
successors and assigns, from any and all actions, causes of action, claims,
debts, damages, demands, liabilities, obligations, and suits, of whatever kind
or nature, in law or equity of Borrower, whether now known or unknown to
Borrower, and whether contingent or matured (collectively, "Claims"): (i) in
respect of the Loan Agreement, the Loan Documents, or the actions or omissions
of Lender in respect of the Loan Agreement and the Loan Documents; and (ii)
arising from events occurring prior to the date of this Amendment. The
foregoing release and discharge shall, automatically and without further action
of the Borrower, be deemed renewed as of the date of each advance of Loan
proceeds with respect to all Claims in respect of the Loan Agreement, the Loan
Documents, or the actions or omissions of Lender in respect of the Loan
Agreement and the Loan Documents and arising from events occurring prior to the
date of such advance.
(k) Compliance with Requirements of Prospective Transferee. Borrower
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shall do anything necessary to comply with the requirements of any prospective
transferee or servicer of the Loan, in order to enable Lender or such transferee
to sell, transfer, deliver, assign, securitize or grant a participation in the
Loan; provided, however, that Borrower shall not be required to do anything that
has the effect of changing the essential economic terms of the Loan Agreement.
(l) Indemnity. Borrower hereby indemnifies and covenants and agrees to
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defend and hold Lender and its Affiliates harmless from and against all losses,
costs and expenses, including reasonable attorneys' fees (including both
in-house and outside counsel), incurred by reason of any action, suit,
proceeding, hearing, motion, subpoena or application before any court or
administrative body in which Lender or its Affiliates may be or become involved,
whether as parties, witnesses or otherwise, by reason of this Amendment, the
Loan Agreement or any of the other Loan Documents or the transactions
contemplated thereby.
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(m) Use of Lender's Name/Press Releases. Borrower will not use
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Lender's name (or the name of any of Lender's affiliates) in connection with any
of its business operations, and Lender will not use Borrower's name in
connection with any of its business operations. Borrower will not and will not
permit its Affiliates to, in the future, issue any press release or other public
disclosure using the name of Lender, General Electric Capital Corporation or any
of their respective Affiliates or referring to the Loan Agreement or the other
Loan Documents without at least two (2) Business Days prior written notice to
Lender and without the prior written consent of Lender unless (and only to the
extent that) (i) Borrower or such Affiliate of Borrower is required to so
disclose under law and then, in any event, such Borrower or Affiliate will
consult with Lender before issuing such press release or other public disclosure
or (ii) Borrower or such Affiliate of Borrower is required to so disclose in
connection with any regular and periodic reports filed with any securities
exchange or with the Securities and Exchange Commission. Borrower consents to
the publication by Lender of a tombstone or similar advertising material
relating to the financing transactions contemplated by the Loan Agreement upon
two (2) Business Days prior notice to Borrower. Borrower may disclose to third
parties that Borrower has a borrowing relationship with Lender. Nothing
contained in the Loan Agreement is intended to permit or authorize Borrower to
make any contract on behalf of Lender.
(n) Appointment of Agent. Each of the entities comprising Borrower
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(other than New York Health Care) hereby irrevocably appoints and constitutes
New York Health Care as its agent to request and receive Revolving Credit Loans
(and to otherwise act on behalf of each such entity pursuant to the Loan
Agreement and the other Loan Documents) from Lender in the name or on behalf of
each such entity. Lender may disburse the Revolving Credit Loans to the bank
account of any one or more of such entities without notice to any of the other
entities comprising Borrower or any other Person at any time obligated on or in
respect of the Obligations. Each of the entities comprising Borrower (other
than New York Health Care) hereby irrevocably appoints and constitutes New York
Health Care as its agent to receive statements of account and all other notices
from Lender with respect to the Obligations or otherwise under or in connection
with the Loan Agreement and the other Loan Documents. No purported termination
of the appointment of New York Health Care as agent shall be effective without
the prior written consent of Lender.
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IN WITNESS WHEREOF, intending to be legally bound, and intending that this
instrument constitute an instrument executed under seal, the parties have caused
this Amendment to be executed as of the date first written above.
LENDER:
XXXXXX HEALTHCARE FINANCE, INC.
a Delaware corporation
By:/s/
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Name:
Title:
BORROWER:
NEW YORK HEALTH CARE, INC.
a New York corporation
By:/s/
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Name:
Title:
NYHC NEWCO PAXXON, INC.
a New York corporation
By:/s/
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Name:
Title:
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